HousingPANIC - The Housing Bubble Blog with an Attitude Problem, 2005 - 2008: BUBBLETALK - September thread to discuss the epic housing meltdown underway

September 29, 2006

BUBBLETALK - September thread to discuss the epic housing meltdown underway

Post housing bubble articles here, talk about off-subject topics (in other words, don't threadjack the following threads) and have a good chat. Above all, KEEP IT CLEAN and have fun

499 comments:

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Anonymous said...: Check this out:

http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm?cnn=yes

"They had paid $167,000 for their current four bedroom, two-and-a-half bath, 2,861 square foot contemporary that they bought new, on the last day of 2002...Believing that the house would sell itself, Young decided to list it through Flat Rate Realty, a for-sale-by-owner operation that will place a property on the multiple listing service for a fee of $99. He priced it at $402,000...They re-priced the house, lowering it to $369,000 and then to $349,000...We wanted a bigger home - with a pool...The new house cost $562,000 so they were really counting on profits from the old place to help...I absolutely need the profit from my old home to afford the new one," says Young. "Even with rental income from one of the homes, there's no way I can afford both mortgages at the same time."; September 22, 2006 7:30 PM
Anonymous said...: I absolutely need the profit from my old home to afford the new one," says Young. "Even with rental income from one of the homes, there's no way I can afford both mortgages at the same time."
+++++++++++++

WHY do people buy a new house when they haven't sold their old one? Is this stupid or what? Yet, people do this all the time....; September 22, 2006 9:58 PM
Anonymous said...: Can the select few of you folks please stop pasting entire articles, and just post the links please?

Thanks :); September 22, 2006 10:43 PM
Anonymous said...: In the pre spec house bubble years, it was common to put a contract on a home you wanted to purchase with a contingency term which stated that the buyer would close on the purchase "contingent' on the sale of the buyers existing home, which would also be on the market.

With the boom in spec buying, 10 buyers would line up and make offers in the driveway with sellers only accepting only the "tightest" offer.

Ergo, the buying culture changed and the contingency offers were turned down.

Messed up, but the free market is what it is then and now.; September 23, 2006 3:55 PM
Anonymous said...: Has anyone checked the yahoo headlines? Several Border Patrol agents are being investigated for corruption ranging from drug to illegal alien smuggling. One agent was believed to be charging $1,500 per head and makes at least $60k per shift. Men - that's a lot of money. No wonder we're having 12 million illegals now.; September 23, 2006 7:44 PM
john_law_the_II said...: remmber what greenspan said- something about the abililty to manage interest rate risk/consumers MIGHT have saved money in the past.

from the times:

"According to lenders and mortgage brokers, borrowers who are staying with ARM’s are divided into three groups: those for whom the possibility of higher interest rates is not a concern; those who know they will not be staying in their homes for long; and those who simply cannot afford higher monthly payments — people who are essentially at the mercy of the market."

he did not recommend ARMs.; September 23, 2006 8:22 PM
Larry said...: john_law_the_II said..."he did not recommend ARMs. "

Actually, he did. He specifically said that the risk premium of a 30-year fixed rate loan over that of an A.R.M. was not justified and the borrower would save a lot of money with an A.R.M.
And, for once in his career I agreed with him then.; September 24, 2006 12:27 AM
Anonymous said...: Larry Nusbaum:

Correct me if I'm wrong, but I think Greenspan was just laying out the facts. In fact he said something like; "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage." The keyword here is "might" benefit. He was not sure and previous studies perhaps did not provide any evidence, because during that time, the market was in normal condition.

Under normal market condition (no bubble), I think ARM has its advantages. For example, I can get qualified for a traditional loan at 7.5% fixed for 30 years. Instead, I will opt for an ARM at 5%. This way, I can save the difference. Now, even if it adjust to near 7%, I can then refinance the loan to a traditional one. I know that I can still afford it, because that was the rate that I got qualified to begin with.

Any input?; September 24, 2006 3:31 AM
john_law_the_II said...: "Actually, he did. He specifically said that the risk premium of a 30-year fixed rate loan over that of an A.R.M. was not justified and the borrower would save a lot of money with an A.R.M.
And, for once in his career I agreed with him then. "

yes, and he said to the degree that people wanted to manage interest rate risk.; September 24, 2006 3:50 AM
Anonymous said...: I agree with you john_law_the_ii.

What Greenspan was doing is giving consumers an option that fits their financial situation. It's not his responsiblity to figure one's financial standing and capabilities.

I think were the problem occured was that Greenspan said something that is beyond the grasp of an average consumer. He is not thinking tha same way an average Joe is thinking. Sometimes he uses those $100 words that an average guy couldn't understand.; September 24, 2006 4:32 AM
Anonymous said...: The epic meltdown can be minimized by promoting our properties a bit more. Consider using web 2.0 that is consumer-centric and really drum up support.

Dani Babb, PhD
commissions-at-risk.com; September 24, 2006 5:18 AM
Anonymous said...: One of the great bubbles of all time was the stock market in 1929. The market was down for a quarter of a century after the crash. When the market had dropped a little people said, "buy now", but the selling panic continued for some time without resting.

There have been real estate bubbles too. I think the prices in this current time are inflated beyond their actual value. Having more square feet per person of living space does not always increase worker productivity to any great degree. People were investing in a fad rather than something that was productive. Having excess real estate on hand with no buyers or renters is actually unproductive. Tripling real estate prices in some areas could not triple again in the near future.; September 24, 2006 5:29 PM
Anonymous said...: "Earlier this month a Chicago developer sold 150 condominiums in a two-hour lottery by discounting prices about 20 percent from what he would have asked last spring, an indication that industry observers say could signal widespread price reductions here and around the country."

Nice to see there are still a whole lot of greater fools out there. I wonder what these 150 suckers will think in a years time, when they also are selling for 20% less. YAAAHAHAHAHAHA!; September 24, 2006 5:42 PM
Anonymous said...: Last weeks Businessweek Magazine had an amazing article about the job growth of the past 5 years. Of the 2.3MM new jobs created, 1.7MM were healthcare related (unproductive), 940K were new gov't payrolls, 900K were real estate related, AND THE REST OF THE ECONOMY LOST 1.2MM JOBS OVER THAT TIME PERIOD! Just imagine what would have happened to our economy if Greenspan and Bush hadn't juiced this economy so irresponsibly. Really Really Really Scary! If the housing bubble pops, this economy could see a 1970s type recession for the better part of a decade.; September 24, 2006 6:16 PM
Anonymous said...: Commentary

H5N1 Bird Flu Detection in North America
Recombinomics Commentary
September 24, 2006

A Colorado State University laboratory tested 66 samples taken from Northern pintail ducks in Montana, the U.S. Department of Agriculture and the Interior Department said in a news release. Sixteen of the 66 were sent to the National Veterinary Services Laboratory in Iowa for more tests. Some tested positive for H5, some were positive for N1 and one sample was positive for both.

http://www.recombinomics.com/News/
09230601/H5N1_North_America.html; September 24, 2006 10:25 PM
Anonymous said...: I loved the 70's!; September 24, 2006 10:31 PM
Anonymous said...: Speculators jack up prices in Calif. desert

NEWBERRY SPRINGS, Calif. - Ashraf Fahim insists he is not a gambler. Yet when he decided to begin betting on real estate, he headed straight to the high-stakes table in California's remote desert.

Two years ago, as some experts cautioned that soaring prices were creating a housing bubble, the Egyptian-born pediatrician borrowed about $400,000 against his Southern California home and began buying dirt - dirt cheap.

Fahim concentrated his purchases on an area he felt was undiscovered, a skull-scorching stretch of sagebrush and farmland where, until recently, land could languish on the market for years until it sold.

"Sometimes you do things in life, and you don't know why you're doing it," said Fahim, 42, who bought several parcels for a few thousand dollars an acre - a few for just hundreds of dollars an acre. "Even my wife was yelling at me, 'Why are you buying all of these things?' I told her I didn't know. It was just all very cheap."

Soft landing or crash
As analysts debate whether the real estate slowdown will result in a soft landing or a crash, investors are trolling for bargains - and a big score - in the middle of nowhere. One such hot spot is Newberry Springs, a vast, unincorporated area in the Mojave Desert that's home to just a few thousand people spread out in homes on large parcels.

Last year, $15.6 million in real estate sold in the 92365 ZIP code encompassing much of Newberry Springs, nearly seven times the amount in 2000, according to DataQuick Information Systems. Figures through July are on pace with last year.

The most common buyers are people such as Fahim, small investors who lament not jumping into the market when Riverside was inexpensive, Fontana was a bargain, and Barstow was considered too far east.

"They're looking for hidden gems, overlooked things," said Patrick Duffy, an analyst with Hanley Wood Market Intelligence, a real estate consulting firm. "It seems speculative. But God bless them, because that's how people make money."

Or lose it. The desert has a history of real estate dreams evaporating in the blazing sun. California City, incorporated 41 years ago north of Edwards Air Force Base as the state's third-largest city in area, is home to only 12,000 people. In the 1950s, "waterfront property" on the Salton Sea was hyped until flooding and the stench of algae blooms and fish kills sank the boom.

Newberry Springs has seen its share of get-rich-quick dreams too. Worm farm scams. Chinchilla farm ventures. Ostrich farm schemes.

"We're gullible out here, I guess," said Fred Stearn, a former New York City police officer who moved to the Mojave for its clean air and has been brokering land in Newberry Springs for a quarter-century.

In the face of Southern California's cooling housing market, investors cite a litany of reasons Newberry Springs is poised to attract national home builders who will significantly drive up the value of their mostly vacant land. Among them: job growth and planned Indian casinos in Barstow, a new water pipeline to the California Aqueduct and far-from-certain plans for a high-speed train linking Las Vegas and Orange County.

Fueled by train
Ironically, the high-speed train idea helped fuel Newberry Springs' last real estate boom, in the 1980s, said Joseph W. Brady, a high-desert land broker whose company tracks the region's economy. When the bust came in 1990s, the value of outlying vacant land plunged about 80 percent.

Brady worries it's happening again.

"Why would anybody in their right mind build out there now? ... It's almost on the edge of the Earth," Brady said. He said he believes big home builders might look to places such as Newberry Springs - someday, but not in this uncertain market.

Berni Ediga insists he is not a gambler. Yet after watching his brother get rich in real estate, he started thinking: Why not me?

"Real estate always goes up," said Ediga, 34, a Carlsbad business analyst who bought property in Arizona, Washington state and his native India. Last year, Newberry Springs caught his attention.

At first he was skeptical. "It's pretty remote country. It's, like, 'Wow, who lives there?' " But after seeing prices soar in the months since his first purchase, he's looking to buy more.

Doubled or tripled
Although local brokers estimate that prices have doubled or tripled in the past 20 months, the far-out desert remains inexpensive by California standards. An acre in Fontana can easily run $700,000. In Newberry Springs, it's going for the price of a used car.

"The developers haven't hit yet. Right now, it's the investors who are scarfing up the land, and we're just holding it and waiting," said Wesley Sperry, who grew up in Newberry Springs and has made enough money on desert land deals to retire at 43.

Fresh out of the Army in the 1980s, he borrowed money for his first property and built a home. He borrowed off the home, scrimped, saved, borrowed more and developed two gas station/minimarts. In the 1990s he sold them and reinvested in other property.

Among his holdings are numerous rental homes, the land where the local post office sits and 30 vacant tracts in Newberry Springs, according to public documents.

"Ever play Monopoly? It's like that. But it ain't that simple," said Sperry, who lives in his original home but owns a BMW, a Mercedes and a Cadillac Escalade and logs a lot of time traveling with his family in a 40-foot recreational vehicle to escape the Mojave heat.

http://www.azcentral.com/
news/articles/
0924calif-desert0924.html; September 25, 2006 1:51 AM
Anonymous said...: The story behind the story.

Workers resist paying bigger share of their health insurance

The county and striking employees are battling over a number of issues in a proposed five-year contract, mostly relating to health care coverage.

http://dwb.sacbee.com/content/
news/story/14318592p-15240833c.html

But what is not said behind the story is that many county employees who recently brought a new home can't afford to stay on strike because their mortgage is high.

The real story is will wages stay flat in California as employers cope with higher medical cost, or will this be the begining of a major layoff period in California.; September 25, 2006 2:20 AM
Anonymous said...: As economy blooms, job growth wilts

Region's evolution is drawing residents and retailers, but officials say employment opportunities must follow

East County has added residents much faster than jobs in recent years. From 2000 to 2005, East County experienced a net gain of about 350 jobs, according to the Association of Bay Area Governments. That's a 1 percent increase.

Yet during the same period, the region added about 44,000 residents, a 19 percent gain. The difference was particularly stark in Brentwood: That fast-growing city expanded its job base by only 1.7 percent, while the population almost doubled.

The inescapable conclusion: Thousands of residents in those cities are working someplace else, and they are driving thousands of additional vehicles that pour onto local roads every day.

Read the comment:

This article highlights several problems concerning growth in the bay area. The first is lack of common sense on the part of local governments and a majority of residents. Somone please explain to me how creating minimum wage jobs, the majority of which are being created in the east bay, justifys and supports building 600k plus homes. Minimum wage jobs dont buy 600k houses. Second, strip malls are popping up all over. The city government does this for one reason. Strip malls pay taxes that support local government, as a result of Prop 13, homeowners don't even come close to paying for the services that they use. To cover the massive shortfall in government income, cities have resorted to creating communities supported by a strip mall tax base. You will never achieve a culture and quality of life based on minimum wage businesses and strip mall tax base. Instead, these types of communities become havens for low income, and transient workers or distance commuters. The sad reality is, that in 10 years, east county will be nothing but uncontrollable sprawl, little quality of life, and lots of crime. Oh, and you will have lots of minimum wage earners that can't afford to live in their own community.

http://pod01.prospero.com/n/pfx/
forum.aspx?msg=954.2&nav=
messages&webtag=kr-contratm; September 25, 2006 2:33 AM
Anonymous said...: Liar Loans

What if you could get into Stanford by simply telling the admissions office you are an A-plus student -- without any proof? Or how about driving a brand new Mercedes off the lot after promising the salesman you'll send him a check next week? Fat chance, right? So you might be surprised how easy it is for people buying a new house to borrow hundreds of thousands of dollars by simply telling the bank how much money they make -- without any proof. It's called a "stated income" loan, but many people inside the housing industry call it something else: a "liar loan."

Brian is a Bay Area mortgage broker. "Michael" is his client -- a 23-year-old auto mechanic. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month -- leaving him $200 in the red. He was only able to get the loan because his broker used "stated income" to inflate his paycheck. Brian (the broker) said, "I put on the application that he made $13,000 a month, which was unverified … That's the definition of a stated income loan. You state the income. Most definitely it was a fraudulent loan. The income was literally made up from thin air."

Now you might think getting a loan still works like an old Hollywood movie, where buyers have to fully document that they make enough money to pay back the bank. But over the last decade, Bay Area home prices have gone up 300 percent -- far outpacing people's incomes -- which is why nine out of 10 households can no longer afford the median home price of $630,000. So to keep the clients and cash rolling in, banks and other mortgage companies began offering easier terms like no money down, adjustable rates, interest-only, and stated income.

One broker, "Dennis," works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers.

"All of them, because that's why you're going stated." Dennis added. "We've seen the banking industry keep getting more creative, and more creative, and more creative to keep putting fuel on this fire of home appreciation."

Consider, for example, what would happen in a Monopoly game if every player claimed to make more than $200 each time they pass "Go" -- maybe $400, $600, even $1,000 with each pass. Pretty soon: a bidding war, with players paying Boardwalk prices, even for a fixer-upper like Baltic Avenue, based on money they don't really have.

But the buyers may not even know their incomes are being inflated.

Dennis said, "Some may know. But for the most part I would say the consumer is pretty much left out of the loop."

Out of the loop because the broker often prepares the loan papers without ever telling the buyer their income has been inflated. And buyers may then unknowingly sign a fraudulent income number on their loan.

But if it leads to getting their piece of the American dream, homebuyers must be happy, right?

Not according to Beverly and Dwayne, two Bay Area homeowners.

"Right now I'm living from paycheck to paycheck. I'm struggling with putting gas in my car just to get to work," Beverly said.

Last May, Beverly and Dwayne bought their first home. Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly's income as a social worker. She makes $2,750 a month.

But what they didn't know? To make the deal work, the broker boosted Dwayne's salary to an impressive $8,000 a month.

"I wish I did make $8,000 a month," Dwayne said.

In truth, Dwayne is out of work and only gets a small disability check. Nevertheless, based on their inflated income, they qualified for a mortgage of $3,700 a month. That's almost $1,000 more than Beverly's entire paycheck.

"I didn't find out until the signing," Beverly said. "And I said 'I can't afford to pay that,' and the realtor said, 'Don't worry about it, we're gonna immediately refinance it.' "

Refinancing is what keeps many new buyers in the game, but only if interest rates stay low and housing prices go up. Instead, interest rates are rising. And though Bay Area prices are still going up, the market is weakening.

Beverly and Dwayne have spent the last five months trying to refinance. Their life savings are gone. They sleep on an air mattress. They've already been late on one loan payment.

"This has turned into a complete nightmare," Beverly said.

Now you might think mortgage lenders would be more careful giving out hundreds of thousands of dollars without proof of income. But in fact there's almost no risk to the bank. That's because most banks turn right around and sell their loans to real estate investors on Wall Street -- to mutual funds, pension funds -- even foreign countries.

Raphael Bostic teaches real estate at the University of Southern California. He said in the old days, if a family didn't repay its loan, the bank took the hit.

"In today's environment, if a family does not repay, some nameless, faceless guy in Wall Street in New York, or the investors take the hit. The bank is not put at risk at all, and so they're not that concerned."

He added, "What it does is it reduces to some degree a bank's concern and a bank's diligence in making sure that the loans they originate are actually going to pay in the long run."

And banks and brokers aren't concerned about getting caught cheating, said Brian, which is why stated income fraud remains a dirty little secret from most buyers.

And the reason why nobody in the loan industry is talking about it? According to Brian, "When you have a $10,000 commission check dangling in front of you, it's kind of hard to want to give that up."

Beverly said, "You know they say you make sacrifices to keep what you have, but they didn't tell me I would totally have to stop living and just exist because of somebody else's deceit."

http://cbs5.com/30minutes/
local_story_266005029.html; September 25, 2006 3:04 AM
Anonymous said...: Rates for 30-year mortgage rates dropped this week to the lowest level in six months, but the break for homebuyers may not be enough to buoy sagging sales in San Bernardino and Riverside counties, according to some real estate agents, mortgage lenders and a university economist.

"It is good news. It is going to help. But it is not going to make a significant change in the housing outlook,"

Lower fixed interest rates may provide an alternative to homeowners with adjustable rate mortgages that started at submarket teaser rates and have steadily climbed, Adibi said.

But fixed rate mortgages aren't low enough to make homes much more affordable to would-be buyers at today's high prices, he added.

A $300,000 mortgage at the 6.8 percent peak rate in July would require monthly payments of $1,956 in principal and interest. A mortgage at Thursday's 6.4 percent rate would lower the monthly payment by just $79.

And there is even less relief for home buyers in adjustable rate market

Real estate agents said despite lower interest rates and price reductions offered by more builders and private sellers, prospective home buyers are sitting on the fence, waiting for something more dramatic to stir them to buy.

"A lot of buyers are saying they will wait until November or December until the sellers are desperate.

http://www.remodeling.hw.
net/industry-news.asp?
sectionID=149&articleID=
368211; September 25, 2006 3:40 AM
Anonymous said...: "Out of the loop because the broker often prepares the loan papers without ever telling the buyer their income has been inflated. And buyers may then unknowingly sign a fraudulent income number on their loan."
+++++++++++

It looks like a lot of mortgage brokers will be going to jail along with the buyers who signed the fraudulant loan documents the brokers created....; September 25, 2006 4:21 AM
Anonymous said...: Could happen mortgage brokers could be going to jail along with the buyers who signed the fraudulant loan documents at least in area like Fresno and Alameda California

http://www.
centralvalleybusinesstimes.
com/links/bubble.mp3; September 25, 2006 4:38 AM
Anonymous said...: Homeowner Feels Cheated with Negative Amortized Loan Program
by Henry Savage

Question: I read your column about false advertising and want to share my story and ask for advice. We own a home in California and had a $450,000, 5.50 percent, interest only mortgage. We were easily making the interest only payments and thought our payments would drop next year.

A loan agent contacted us and we ended up refinancing this loan to a new loan with negative amortization with a rate of 1.45 percent. The new balance is $453,000 and the minimum payment is $1,154. The loan agent said that making the minimum payment would increase our mortgage balance by $36,000 over the next three years.

After making the first two payments, we noticed that our mortgage balance was increasing by $2,000 each month. If this continues, our balance at the end of three years will increase by $75,000, not the $36,000 that was promised. We also thought that our index was fixed at 4.50 percent but have since found out that the index can increase.

There is a prepayment penalty of 15 percent in the first year, ten percent if we refinance in year two, and five percent in year three.

We both have good, steady jobs and could easily have afforded to continue to pay interest only at 5.50 percent. Can you please advise us as to how to get out of this situation?; September 25, 2006 5:49 AM
Anonymous said...: I'm currently a renter that is waiting for better
prices before buying. I'm not bitter at all,
markets go up and down... it's better to buy
in a down market (this one may be a doozy),
plus I don't really have a big need for a house
right now. It's more of a question of the best
place to put my money at this point... so I rent.

Anyway, after seeing empty condos popping
up all around, I thought I would go to the
realtor.com site and see if there were any
deals to be had yet...

My question is, why are the 55 plus condos in
a completely different price range? I mean,
maybe this is expected, but it is really
ridiculus:

Regular 1 bed, 1 bath condos 650-750 square
feet are listed around $80k here (in the
Twin Cities, MN area)

(55plus) 3bed, 2 bath 1800 square feet
condos going for $80k. This is bigger than
most of my friends houses! I'm not sure a
community can be 55 plus only legally... Isn't
this kind of like saying whites only?

Well here's the page:

http://www.realtor.com/FindHome/HomeListings.asp?mlsttl=Minneapolis&frm=bycomm&pgnum=1&mls=minneapolis&lnksrc=REALRSCF2C0002&js=on&poe=realtor&st=mn&areaid=1012144&areaid=1012155&areaid=1012172&areaid=1012173&areaid=1012193&areaid=1012241&areaid=1012243&areaid=1012245&areaid=1012257&areaid=1012261&areaid=1080019&areaid=1080025&areaid=1080027&typ=2&mnprice=0&mxprice=99999999&mnbed=0&mnbath=0&mnsqft=0&ss_fthb=n%2Fa&ss_mitm=n%2Fa; September 25, 2006 5:51 AM
Anonymous said...: The url didn't turn out right. (so that's
why everyone is using tinyurl)

Here's the 55 plus link:

http://tinyurl.com/knsnp; September 25, 2006 5:58 AM
Anonymous said...: "We both have good, steady jobs and could easily have afforded to continue to pay interest only at 5.5 percent."

My suggestion and perhaps the only viable option is for you to refi to a fixed-rate at 30yrs. and it has now dropped (6.4%??) and not too far from the 5.5 IO that you are willing to pay.

Right now, stay away from exotic loans and please don't listen to your loan broker, because he/she is going to tell you what you would like to hear. In addition, those scumbags gets a higher commission on exotic loans. Don't kid yourself. Just pay the pre-payment. It's better to take a small loss now than regret and get stuck later. Besides, any way you look at it, you're screwed anyway, so you just need to take the lesser of the two evils.

Worse case scenario, if the 30 year is not viable, just opt for a 40 year fixed. The interest may be a bit higher, but your payment might be less compare to the 30 yr. You just want to buy time until your income improves further into the future.

Good luck!; September 25, 2006 6:12 AM
Anonymous said...: "Why are the 55 plus condos completely in a different price range?"

Several reasons:

1.) Price may have corrected already to the right price.
2.) Trying to attract the baby boomers.
3.) More or less in line with the expected income (fixed) after retirement.; September 25, 2006 2:56 PM
oneclickplus said...: Thanks in part to this blog, good contrarian input and other educated help, my wife and I are now looking FORWARD to this epic housing meltdown. Yes, forward! We've done the exact opposite of the typical consumer moron. Although we couldn't realistically "sell and rent", we did the next best thing. Our house is now completely paid off and we have managed to sock away a nice cash nest egg which will be used to purchase additional properties when this thing hits rock bottom. Although we expect that home ownership will mean that we take an equity hit, our equity will always be 100% no matter what happens next. As a result of being paid off, our purchasing power will remain unchanged. And with the cash we are saving each month, we should eventually be able to leverage ourselves into several income properties after this mess unfolds. Housing bubble collapse? Bring it on ...; September 25, 2006 4:36 PM
Anonymous said...: What if
a family tree
brought life to
Aig Credit Card Philippines?; September 25, 2006 4:38 PM
Anonymous said...: oneclickplus...
What do you do for a living? Hopefully you keep your job...and all those high hopes are realized. Recessions can get messy. Either way...you're doing the best thing for you and your family. Good luck!; September 25, 2006 6:25 PM
Anonymous said...: Update: Islam Wins, Western Civilization Caves!

http://www.breitbart.com/news/2006/09/25/060925192943.tqohhg8j.html; September 25, 2006 9:54 PM
Anonymous said...: IF ISLAM WINS=NOBODY WINS!

LOLOLOLOLOLOLOLOLOLO!; September 26, 2006 2:51 AM
Anonymous said...: Word on the street about some of the mortgage finance shenaningans that have been going on:

A friend tells me the financing of his condo complex was clearly segregated so that sub-prime mortgages went a no-name shell-company mortgage lender. The "real" mortgages went to a "real bank" (Bank of America, I think).

The idea was that the orignator sweeps the mortgages likely to be bad into a company which is little more than a wastebasket for bad debt. The accounts of this company are then hyped, it is pumped-and-dumped by the execs, and then when all the bad debt defaults, the company will collapse, leaving shareholders/financiers holding the bag. The company principals will have long cashed out, however, and be able to claim that they just "didn't see it coming".

You can bet the originator is getting some sort of kickback, too.

Sadly, this scheme probably describes many large-scale mortgage banking operations nowadays. Perhaps the whole system, really.; September 26, 2006 5:32 AM
Anonymous said...: Great House Flipping site!

http://thisoldhouseflip.blogspot.com; September 26, 2006 5:39 AM
Anonymous said...: Told you all about Gold earlier this year...it did go up! Way Up

Then in August, I said it would drop....and it did correct!

I'm telling you now, Tues Sep.26
Buy Gold! Safe Bet, Great Hedge!
I will and I am Buying....NOW!

Silver (junk) not a bad choice either!; September 26, 2006 5:59 AM
Anonymous said...: "Irrational" mortgage bond prices polarize market

Buyers in the $565 billion market for so-called sub-prime mortgage bonds are clamoring for the high-yield securities, even though experts increasingly warn that pricing has reached "irrational" levels.

Rising delinquencies and forecasts of a deepening deterioration in housing have prompted big investors, including hedge funds, to bet against the securities since late 2005. But prices on bonds backed by loans to riskier borrowers have remained stubbornly high -- longer than many analysts expected -- as yield-hungry investors insist that built-in loss protections are adequate.

"The sub-prime home equity market is in the midst of a giant tug of war," said Tom Zimmerman, an analyst at UBS Securities LLC in New York. The market "is on the border line."

Market participants, including America's biggest mortgage lender and an analyst at the largest U.S. brokerage firm, are warning that worsening credit quality in housing will soon sting holders of sub-prime mortgage bonds.

There is plenty of data to support their views.

Price appreciation that has enriched homeowners for a decade has come to a halt.

The median price of an existing home fell 1.7 percent in August from a year earlier, the first decline since April 1995, the National Association of Realtors said on Monday.

Meanwhile, delinquencies and foreclosures on all types of mortgages rose in the last quarter and will likely increase more, according a report this month from the Mortgage Bankers Association.

At the same time, prices on sub-prime mortgage bonds have crept higher, reducing yields, which typically rise with risks.

Countrywide Financial Corp. created a bond this month whose "BBB" rated class paid 110 basis points above benchmark rates but 35 basis points less than on a similar issue in March.

The yield spread on the highest-rated class of the bond also tightened, to 5 basis points from 7 basis points.

At Merrill Lynch & Co., analyst Kenneth Bruce warned that mortgage companies exposed to sub-prime loans may face lower earnings because demand for the debt "could dissipate quickly" as credit worsens. Rising chances of an "asset fire-sale" are not priced into the related securities, he said.

Costly loans have steered Countrywide away from its so-called correspondent channel, which feeds the company closed mortgages from other lenders.

Chief Executive Officer Angelo Mozilo blamed what he termed "irrational" pricing on Wall Street firms such as Lehman Brothers Holdings Inc. and Bear Stearns Cos.

In a presentation to bond investors last week, he said their "deep pockets" let them outbid others when creating their own issues.

At the same time, Countrywide hired Lehman and Bear as co-managers to help sell the aforementioned bonds.

A Lehman spokesman declined to comment, and Bear did not respond to calls.

While the investment banks "can be aggressive in their pricing for a short time, they will be forced to return to real market pricing quickly because they can't put losses on their balance sheets -- as was done by the thrifts for so many years," Mozilo said.

Still, many investors take the view that they will never be touched by losses.

A UBS study found that house prices would have to show no appreciation for several years before sub-prime losses exceeded 8 percent, the level at which an average "BBB-" rated bond would lose its first dollar of principal.

However, UBS' Zimmerman said the probability of a "BBB-" bond "breaking" rises once volatility is considered.

"It is this uncertainty that enlivens the contest between the housing bears and bulls," he said. "We are all certain sub-prime losses will rise, but none are exactly sure of how high losses will go."

Equity classes, or "residuals," on sub-prime deals are set up to take the first losses.

Issues are also over-collateralized, or contain some form of insurance.

Investors around the world are clamoring for mortgage bonds because of the embedded protections and high yields relative to other assets, said Alex Wei, manager of asset-backed securities at Delaware Investments, in Philadelphia.

They are especially popular in collateralized debt obligations -- securities backed by pools of one or more types of debt.

In debt backed by credit card payments, "BBB" bonds pay about 70 basis points less than sub-prime mortgage issues, and Wei notes that sub-prime bonds, with their credit protections, may turn out to be safer than top-shelf MBS.

There are signs that bearish views are growing amid reports of cooler housing and economic growth.

Yield spreads on the ABX.HE index of 20 sub-prime mortgage securities have widened by 30 basis points in recent weeks.

Orders for new subprime issues, sold to investors as home equity asset-backed securities, have also been far fewer, analysts said.

Economic reports encouraging the bearish view have resulted in speculation that slowing growth will contain inflation and prompt lower interest rates from the Federal Reserve in 2007.

Benchmark 10-year Treasury note yields are anticipating that scenario, with yields falling to their lowest levels in more than six months at 4.55 percent on Monday.

"There are market participants who believe that the weaker housing market would have a devastating effect on the economy," Wei said.

"They have driven yields down by buying Treasuries. Interestingly, they are effectively helping the housing market as lower Treasury rates help reduce mortgage rates, which in turn help housing affordability."

http://today.reuters.com/news/
articlenews.aspx?type=
reutersEdge&storyID=
2006-09-25T165817Z_01_N21401265_
RTRUKOC_0_US-MARKETS-SUBPRIME.xml; September 26, 2006 7:00 AM
Anonymous said...: Question: why is Ben's blog so boring?; September 26, 2006 2:34 PM
Anonymous said...: Question: why is Ben's blog so boring?; September 26, 2006 2:35 PM
Anonymous said...: Here is a link to an interesting discussion regarding illegal immigration in Southwest Florida, but there are some very interesting reader comments regarding housing and the economy:

Link; September 26, 2006 5:49 PM
Anonymous said...: Here is comment from the above link from someone named: NaplesRealEstate;

These types of operations and the harsh publicity that surrounds it unnecessarily affect many workers that are needed and contribute here in our local economy. This type of action is unfair to the many workers that are hardworking and honest and have never been involved in any illegal activity. In order to keep our standard of living and continue the growth in our local economy we have to protect what has made Florida grow such as farming, tourism and the building industry. Locally the building industry is making many homes and condominiums in eastern Collier County, and the loss of workers could have a detrimental affect on getting them completed on time for homeowners.

There are hundreds of residential units that are slated for the master-planned town surrounding the new university being built, the value of which is over $3 billion. Planning and construction on the first phase of residential housing has begun already with completion planned in mid-2007, ahead of the fall 2007 opening for the university campus. There are other develpments in eastern Collier County which need to have a stable work force and resources to obtain labor and material in this competitive market. This type of publicity is not conducive to getting the work completed and detrimental to our local economy.; September 26, 2006 5:53 PM
Anonymous said...: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=675121

pages 6 and 7 look interesting.; September 26, 2006 7:56 PM
Anonymous said...: Anon 2:35:11 PM

Ben's blog is boring because of the immense amount of filtering regarding the posts he chooses to display. I've posted quite a bit of notes that he didn't deem as valuable...so he can kiss my ass.

The mainstream panic will soon be upon us. The more the media brings attention to this, the faster it will fall.; September 26, 2006 8:21 PM
Anonymous said...: Anon 7:56:28 PM

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=675121

That pdf is awesome.
The parrallels with Thailand are downright scary (case study on page 9)...; September 26, 2006 8:39 PM
sc in dc said...: hey keith - what happened to your black monday? or is that next Monday. Today was 2nd highest stock close ever.; September 26, 2006 9:51 PM
Anonymous said...: I got my trailor set up in the Sierras, and I mailed in the keys. I feel like a freed slave. No more hustling for the payment.
Just the clean mountain air in my lungs. No more freeways and smog!
Let them eat keys!

Upside Down in Cal. is now right side up; September 27, 2006 12:53 AM
Anonymous said...: FREE AT LAST! FREE AT LAST! THANK GOD ALMIGHTY I'M FREE AT LAST!!!!; September 27, 2006 2:41 AM
Anonymous said...: upside down in cal.,

it's good to hear from you again and to know that you've move on. just a word of caution; the bank might write it off as "forgiveness debt" and the IRS will go after you for earned income on the loan balance. just make sure you have some savings for that. enjoy the fresh air in the sierra.; September 27, 2006 3:21 AM
oneclickplus said...: "just a word of caution; the bank might write it off as "forgiveness debt" and the IRS will go after you for earned income on the loan balance."

This is nonsense. If it was ever "forgiveness debt", he would end up owning the house. That's the "forgiveness" part of it.; September 27, 2006 3:34 AM
Anonymous said...: I am young (kinda) cute (definitely) and like to be spanked!

Any takers! :)8; September 27, 2006 3:35 AM
Anonymous said...: ....and a female; September 27, 2006 3:36 AM
Anonymous said...: "i am young (kinda) cute...like to be spanked."

yeah - hugo chavez will spank you, because you smell sulfur.; September 27, 2006 3:46 AM
Anonymous said...: A Marine Intel Officer in Al Anbar Shares Some Thoughts
(Courtesy of former Cpl Denny Argall, USMC)
Via e-mail from a retired Army Colonel friend of mine. I LOVED "The Best Chuck Norris Moment" but all of it is interesting.

Classification: UNCLASSIFIED

All: I haven’t written very much from Iraq. There’s really not much to write about. More exactly, there’s not much I can write about because practically everything I do, read or hear is classified military information or is depressing to the point that I’d rather just forget about it, never mind write about it. The gaps in between all of that are filled with the pure tedium of daily life in an armed camp. So it’s a bit of a struggle to think of anything to put into a letter that’s worth reading. Worse, this place just consumes you. I work 18-20-hour days, every day. The quest to draw a clear picture of what the insurgents are up to never ends. Problems and frictions crop up faster than solutions. Every challenge demands a response. It’s like this every day. Before I know it, I can’t see straight, because it’s 0400 and I’ve been at work for twenty hours straight, somehow missing dinner again in the process. And once again I haven’t written to anyone. It starts all over again four hours later. It’s not really like Ground Hog Day, it’s more like a level from Dante’s Inferno.

Rather than attempting to sum up the last seven months, I figured I’d just hit the record setting highlights of 2006 in Iraq. These are among the events and experiences I’ll remember best.

Continued from Page 4

Worst Case of Deja Vu - I thought I was familiar with the feeling of deja vu until I arrived back here in Fallujah in February. The moment I stepped off of the helicopter, just as dawn broke, and saw the camp just as I had left it ten months before - that was deja vu. Kind of unnerving. It was as if I had never left. Same work area, same busted desk, same chair, same computer, same room, same creaky rack, same . . . everything. Same everything for the next year. It was like entering a parallel universe. Home wasn’t 10,000 miles away, it was a different lifetime.

Most Surreal Moment - Watching Marines arrive at my detention facility and unload a truck load of flex-cuffed midgets. 26 to be exact. I had put the word out earlier in the day to the Marines in Fallujah that we were looking for Bad Guy X, who was described as a midget. Little did I know that Fallujah was home to a small community of midgets, who banded together for support since they were considered as social outcasts. The Marines were anxious to get back to the midget colony to bring in the rest of the midget suspects, but I called off the search, figuring Bad Guy X was long gone on his short legs after seeing his companions rounded up by the giant infidels.

Most Profound Man in Iraq - an unidentified farmer in a fairly remote area who, after being asked by Reconnaissance Marines (searching for Syrians) if he had seen any foreign fighters in the area replied “Yes, you.”

Worst City in al-Anbar Province - Ramadi, hands down. The provincial capital of 400,000 people. Killed over 1,000 insurgents in there since we arrived in February. Every day is a nasty gun battle. They blast us with giant bombs in the road, snipers, mortars and small arms. We blast them with tanks, attack helicopters, artillery, our snipers (much better than theirs), and every weapon that an infantryman can carry. Every day. Incredibly, I rarely see Ramadi in the news. We have as many attacks out here in the west as Baghdad. Yet, Baghdad has 7 million people, we have just 1.2 million. Per capita, al-Anbar province is the most violent place in Iraq by several orders of magnitude. I suppose it was no accident that the Marines were assigned this area in 2003.

Bravest Guy in al-Anbar Province - Any Explosive Ordnance Disposal Technician (EOD Tech). How’d you like a job that required you to defuse bombs in a hole in the middle of the road that very likely are booby-trapped or connected by wire to a bad guy who’s just waiting for you to get close to the bomb before he clicks the detonator? Every day. Sanitation workers in New York City get paid more than these guys. Talk about courage and commitment.

Second Bravest Guy in al-Anbar Province – It’s a 20,000 way tie among all the Marines and Soldiers who venture out on the highways and through the towns of al-Anbar every day, not knowing if it will be their last - and for a couple of them, it will be.

Best Piece of U.S. Gear - new, bullet-proof flak jackets. O.K., they weigh 40 lbs and aren’t exactly comfortable in 120 degree heat, but they’ve saved countless lives out here.

Best Piece of Bad Guy Gear - Armor Piercing ammunition that goes right through the new flak jackets and the Marines inside them.

Worst E-Mail Message – ‘The Walking Blood Bank is Activated. We need blood type A+ stat.’ I always head down to the surgical unit as soon as I get these messages, but I never give blood – there’s always about 80 Marines in line, night or day.

Biggest Surprise - Iraqi Police. All local guys. I never figured that we’d get a police force established in the cities in al-Anbar. I estimated that insurgents would kill the first few, scaring off the rest. Well, insurgents did kill the first few, but the cops kept on coming. The insurgents continue to target the police, killing them in their homes and on the streets, but the cops won’t give up. Absolutely incredible tenacity. The insurgents know that the police are far better at finding them than we are. - and they are finding them. Now, if we could just get them out of the habit of beating prisoners to a pulp . . .

Greatest Vindication - Stocking up on outrageous quantities of Diet Coke from the chow hall in spite of the derision from my men on such hoarding, then having a 122mm rocket blast apart the giant shipping container that held all of the soda for the chow hall. Yep, you can’t buy experience.

Biggest Mystery - How some people can gain weight out here. I’m down to 165 lbs. Who has time to eat?

Second Biggest Mystery - if there’s no atheists in foxholes, then why aren’t there more people at Mass every Sunday?

Favorite Iraqi TV Show - Oprah. I have no idea. They all have satellite TV.

Coolest Insurgent Act - Stealing almost $7 million from the main bank in Ramadi in broad daylight, then, upon exiting, waving to the Marines in the combat outpost right next to the bank, who had no clue of what was going on. The Marines waved back. Too cool.

Most Memorable Scene - In the middle of the night, on a dusty airfield, watching the better part of a battalion of Marines packed up and ready to go home after six months in al-Anbar, the relief etched in their young faces even in the moonlight. Then watching these same Marines exchange glances with a similar number of grunts loaded down with gear file past - their replacements. Nothing was said. Nothing needed to be said.

Highest Unit Re-enlistment Rate - Any outfit that has been in Iraq recently. All the danger, all the hardship, all the time away from home, all the horror, all the frustrations with the fight here - all are outweighed by the desire for young men to be part of a 'Band of Brothers' who will die for one another. They found what they were looking for when they enlisted out of high school. Man for man, they now have more combat experience than any Marines in the history of our Corps.

Most Surprising Thing I Don’t Miss - Beer. Perhaps being half-stunned by lack of sleep makes up for it.

Worst Smell - Porta-johns in 120 degree heat - and that’s 120 degrees outside of the porta-john.

Highest Temperature - I don’t know exactly, but it was in the porta-johns. Needed to re-hydrate after each trip to the loo.

Biggest Hassle - High-ranking visitors. More disruptive to work than a rocket attack. VIPs demand briefs and ‘battlefield’ tours (we take them to quiet sections of Fallujah, which is plenty scary for them). Our briefs and commentary seem to have no affect on their preconceived notions of what’s going on in Iraq. Their trips allow them to say that they’ve been to Fallujah, which gives them an unfortunate degree of credibility in perpetuating their fantasies about the insurgency here.

Biggest Outrage - Practically anything said by talking heads on TV about the war in Iraq, not that I get to watch much TV. Their thoughts are consistently both grossly simplistic and politically slanted. Biggest offender - Bill O’Reilly - what a buffoon.

Best Intel Work - Finding Jill Carroll’s kidnappers - all of them. I was mighty proud of my guys that day. I figured we’d all get the Christian Science Monitor for free after this, but none have showed up yet. Talk about ingratitude.

Saddest Moment - Having the battalion commander from 1st Battalion, 1st Marines hand me the dog tags of one of my Marines who had just been killed while on a mission with his unit. Hit by a 60mm mortar. Cpl Bachar was a great Marine. I felt crushed for a long time afterward. His picture now hangs at the entrance to the Intelligence Section. We’ll carry it home with us when we leave in February.

Biggest Ass-Chewing - 10 July immediately following a visit by the Iraqi Deputy Prime Minister, Dr. Zobai. The Deputy Prime Minister brought along an American security contractor (read mercenary), who told my Commanding General that he was there to act as a mediator between us and the Bad Guys. I immediately told him what I thought of him and his asinine ideas in terms that made clear my disgust and which, unfortunately, are unrepeatable here. I thought my boss was going to have a heart attack. Fortunately, the translator couldn’t figure out the best Arabic words to convey my meaning for the Deputy Prime Minister. Later, the boss had no difficulty in convening his meaning to me in English regarding my Irish temper, even though he agreed with me. At least the guy from the State Department thought it was hilarious. We never saw the mercenary again.

Best Chuck Norris Moment - 13 May. Bad Guys arrived at the government center in the small town of Kubaysah to kidnap the town mayor, since they have a problem with any form of government that does not include regular beheadings and women wearing burqahs. There were seven of them. As they brought the mayor out to put him in a pick-up truck to take him off to be beheaded (on video, as usual), one of the bad Guys put down his machinegun so that he could tie the mayor’s hands. The mayor took the opportunity to pick up the machinegun and drill five of the Bad Guys. The other two ran away. One of the dead Bad Guys was on our top twenty wanted list. Like they say, you can’t fight City Hall.

Worst Sound - That crack-boom off in the distance that means an IED or mine just went off. You just wonder who got it, hoping that it was a near miss rather than a direct hit. Hear it every day.

Second Worst Sound - Our artillery firing without warning. The howitzers are pretty close to where I work. Believe me, outgoing sounds a lot like incoming when our guns are firing right over our heads. They’d about knock the fillings out of your teeth.

Only Thing Better in Iraq Than in the U.S. - Sunsets. Spectacular. It’s from all the dust in the air.

Proudest Moment – It’s a tie every day, watching my Marines produce phenomenal intelligence products that go pretty far in teasing apart Bad Guy operations in al-Anbar. Every night Marines and Soldiers are kicking in doors and grabbing Bad Guys based on intelligence developed by my guys. We rarely lose a Marine during these raids, they are so well-informed of the objective. A bunch of kids right out of high school shouldn’t be able to work so well, but they do.

Happiest Moment - Well, it wasn’t in Iraq. There are no truly happy moments here. It was back in California when I was able to hold my family again while home on leave during July.

Most Common Thought - Home. Always thinking of home, of Kathleen and the kids. Wondering how everyone else is getting along. Regretting that I don’t write more. Yep, always thinking of home.

I hope you all are doing well. If you want to do something for me, kiss a cop, flush a toilet, and drink a beer. I’ll try to write again before too long - I promise.

Semper Fi,; September 27, 2006 3:55 AM
Anonymous said...: Who else out here is shorting TOLL, and WaMu???

hahahahha; September 27, 2006 9:13 AM
Anonymous said...: semper fi:

thank you for your service. that's all i have to say.; September 27, 2006 7:30 PM
Anonymous said...: Dow flirts with record
30-share average edges ever closer but investors show caution after weak durable goods report; oil seesaws.
September 27 2006: 12:34 PM EDT

NEW YORK (CNNMoney.com) -- Stocks rose Wednesday afternoon, pushing the Dow Jones industrial average within a whisper of its record closing high, before the world's most widely watched stock market gauge pulled back.

A weak read on durable goods orders and a mixed read on the housing market tempered the session's gains.

Special Reportfull coverage

OPEC keeps its eyes on falling oil prices
Oil surges after $60 isn't broken
Gasoline prices keep falling
Putting ethanol in the fast lane

More on the market
Wall St. gains from housing slump
Many worry the slowdown is hitting the economy, but investors pulling out of real estate are pumping cash into stocks. (more)
The pause that doesn't refresh
'An end to rate hikes is near!' has been bulls' rallying cry for months. Only thing is, it shouldn't be. (more)
Stocks that can ride a pause
With the Fed taking a break, markets may now shift to worrying about an economic slowdown -- bad for profits and stocks. But these sectors may benefit. (more)

The 30-share Dow (up 28.17 to 11,697.56, Charts) added about 0.2 percent three hours into the session after earlier coming within three points of its record closing high of 11,722.98, hit on Jan. 14, 2000. The record trading high is 11,750.28.

A surprisingly strong consumer confidence report gave stocks a leg up Tuesday, putting the Dow about 53 points from its record close.

The record is a psychological barrier but not necessarily one that Wall Street professionals are much influenced by, said Tom Schrader, managing director of U.S. stock trading at Legg Mason.

Should the Dow break its record close or trading high, "it will get a lot of press tonight and could make your mom and pop investor want to put more money to work tomorrow," Schrader said. But it doesn't make a broader statement about the market, he said.

"The Dow is not really representative of the U.S. economy," Schrader added. "It's a benchmark, but the S&P 500 and the Nasdaq are broader."

The broader S&P 500 (up 2.68 to 1,339.02, Charts) added a few points Wednesday after ending the previous session at its best point since February 2001. The Nasdaq composite (up 7.95 to 2,269.29, Charts) rose about 0.3 percent higher.

While the Dow is near its record, the S&P 500 and Nasdaq are far from their closing highs - the S&P 13 percent away and the Nasdaq 55 percent.

Run, slide, recovery
The Dow record in January 2000 came near the tail end of the Internet boom of the late 1990s. The Nasdaq and the S&P 500 hit their record highs roughly two months later.

But the broader market began to slide soon after. Within two weeks of hitting that January 2000 peak, the Dow had lost 8 percent. The Dow and the broader market recovered most of the losses in April and then in August of that year, before giving up and heading lower.

The bursting of the Internet bubble, the recession that ended in 2001 and the events of 9/11 all contributed to a bear market that lasted for three years. After bottoming out in October 2002, stocks have slowly recovered.

Last May, the S&P 500 hit a 5-1/2 year high and the Dow closed at its highest point since the record.

But record high oil prices and worries about the economy caused investors to backtrack through the summer. Stocks have since recovered, thanks to hopes that falling oil prices and slower but not too slow economic growth mean the nation is not heading for a recession, but a "soft landing."

Wednesday's market
A surprisingly weak read on August durable goods orders Wednesday initially seemed to challenge the recent economic optimism, as it suggested that perhaps the economy is slowing more than expected.

However, after a dip at the open Wednesday, stocks again moved higher.

Investors also took in a report that showed new home sales rose in August from July's revised numbers. But the median price of a new home dipped from a year earlier, due to an oversupply of new homes, further signs of the slowdown hitting the housing market.

Stock gains were fairly broad-based, with 21 out of 30 Dow stocks rising, led by Intel (up $0.62 to $20.58, Charts), McDonald's (up $0.75 to $39.81, Charts), General Motors (up $0.52 to $31.93, Charts) and General Electric (down $0.08 to $35.36, Charts).

Market breadth was positive. On the New York Stock Exchange, winners beat losers five to three as 800 million shares changed hands. On the Nasdaq, advancers topped decliners four to three as 1 billion shares changed hands.

U.S. light crude oil for November delivery rose 44 cents to $61.45 a barrel on the New York Mercantile Exchange, after falling earlier on a strong gain in inventories.

COMEX gold for December delivery rose $4.10 to $601.20 an ounce.

Treasury prices turned lower, with the yield on the benchmark 10-year note rising to around 4.59 percent from 4.58 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained modestly versus the yen and was little changed against the euro.; September 27, 2006 9:03 PM
Anonymous said...: A DRUNK DRIVING A HUMMER A MILE WIDE

Wednesday, September 27, 2006

Like spectators gawking at a speeding drunk, we have been watching the housing bubble closely...we're wondering what he'll run into.

In this, we are different from most viewers. Most people seem to think he'll run every red light in town and then just coast to a stop out by the dump. Then, he'll have a chance to sober up without hurting anyone.

Maybe so. But we doubt it.

This drunk is driving a Hummer a mile wide.

Here's the hot news:

For the first time in 11 years, no longer is the rate of growth in housing prices merely flattening...now house prices are actually going down!

Here's the Reuters' report:

"The pace of existing home sales in the United States fell for a fifth straight month in August and prices dropped from year-ago levels for the first time in more than 10 years, a realtors group said on Monday.

"While the report offered a fresh sign of cooling in the U.S. housing market, the sales drop was not as steep as expected on Wall Street, where economists had looked for the pace to slow to 6.18 million units.

"The report, however, did show prices have begun to drop when compared to the lofty levels of last year. The median price dropped to $225,000, off 1.7 percent from August 2005 and the first annual fall since April 1995.

"In addition, the stock of unsold homes on the market rose 1.5 percent to 3.92 million units. At August's sales pace that represented a 7.5 months' supply, the highest since April 1993."

Tech stocks could go down without doing much damage to the broader economy. You win some; you lose some; that's just the way it goes. But housing is too important to lose. Too many people count their blessings in housing. Too many people depend on it. Too many people have too much of their wealth tied up in the roofs over their heads. And too much of the nation's GDP is linked to the bubbly housing market.

While a rising housing market pumped money into the economy...a falling housing market will suck it out. In the last two years, about $1.3 trillion was "taken out" of housing by way of refinancings and equity withdrawals, and shoved into the U.S. economy. But now there is no more equity to take out. And even in a flat market, the Institutional Strategist estimates that the owners of 8 million houses will have their mortgage payments increased by as much as 50% over the next 16 months.

Imagine what happens with prices falling. Suddenly, the equity disappears. Sellers – if they can get a bid – have to put the money back into housing. That is, one way or another, they have to make up the difference between what they borrowed against and what the house is really worth. In many cases, that will mean owners will walk away from their houses – putting more and more properties on the market at distressed prices.

"The home-equity line has supported American consumer spending," wrote Lon Witter in Barron's last month, "but at a steep price: Families that tapped into their home equity with creative loans are now in the same trap as those who bought homes they couldn't afford at the top of the market."

Buyers have been strapped for cash from the get-go – even in the midst of the biggest bulge of liquidity the world has ever seen. As many as 70% of the people who took out ARMs (adjustable rate mortgages) ended up making the lowest permissible payment.

As the bubble grew, mortgage lenders became more reckless...as if Avis or Hertz were to give young drivers a bottle of whiskey along with the car keys. Loans made with 'reduced documentation' – wherein the borrower was allowed to state his own level of compensation, no questions asked – rose to 40% of the entire mortgage pool. Eventually, the Mortgage Asset Research Institute wondered how much lying borrowers were doing. They did a survey and found that 90% of borrowers inflated their income by at least 5%...and nearly 60% of them falsified the figure by more than 50%.

What are credits of that kind worth? Borrowers pretended to earn more than they actually did, so they could buy houses they couldn't afford...and lenders pretended the credits were good so they could sell them on to hedge funds, which pretended to know what they were doing. Now that prices are going down, we're about to find out what all that pretense will cost. We don't know the answer, but we guess it will be more than most people expect.

• Although the gas price has been steadily declining in recent weeks, people are still looking for a fuel-efficient, environmentally friendly option for transportation.

The big automakers are falling over themselves to develop what has been coined "the car of the future"...we've got the Toyota Prius...GM is claiming to have "reinvented the automobile" with their Chevy Sequel, a fuel cell powered car...and now Honda reports yesterday that they have developed a new and simple diesel powertrain that is as clean as gasoline-fueled cars.

"Its new diesel drivetrain features a unique method that generates and stores ammonia within a two-layer catalytic converter to turn nitrogen oxide into harmless nitrogen," reported the Japanese manufacturer.

Although some fine-tuning and technical hurdles remain, Honda hopes to roll out this diesel engine with in three years.

"Just as we paved the way for cleaner gasoline engines, we will take leadership in the progress of diesel engines," Honda Chief Executive Takeo Fukui told a news conference at the automakers R&D center north of Tokyo.

• Here is something interesting: for the first time in 90 years, the United States is paying more to foreign creditors than it receives from its overseas investors. The Wall Street Journal says this development may presage a drop in U.S. living standards.

• We are grateful to the hedge funds. While the lumpen watch reality TV for laughs, we have the comic unreality of hedge fund industry.; September 27, 2006 9:34 PM
Anonymous said...: Lereah has got to be the biggest patsy in the world. He's not an 'economist'. He only says what the NAR wants him to. They could get rid of him and just do press statements.; September 27, 2006 9:58 PM
Anonymous said...: For all new comers to this site:

Only one histerical lunatic homo per site!

Since we have borkafatty, no more please!; September 27, 2006 11:04 PM
Anonymous said...: Buddy of mine had a house built just across the border in Mexico. He used his HELOC loan! Cost $120k. Cost of living is about 20% of here!
Living like a local. What's the down side?; September 27, 2006 11:54 PM
Anonymous said...: The down side?

Your in Mexico!; September 28, 2006 1:51 AM
Anonymous said...: OLE!; September 28, 2006 1:51 AM
Anonymous said...: The dumbing down of Amerika is alive and Well!!; September 28, 2006 1:57 AM
Anonymous said...: largest mortgage frauds in American history

http://tinyurl.com/fsyu5; September 28, 2006 4:15 AM
Anonymous said...: How much of your tax dollars are being use by President Bush to bribe the Paki Pres and Kubal Kabul tonight to produce Osama as his October suprise this year?

Photo Op of Bush arresting Osama in person is probably worth another 100 million of your money.; September 28, 2006 4:42 AM
Anonymous said...: Home loan demand falls despite rate plunge

U.S. mortgage applications fell for the first time in four weeks even as interest rates dropped to a six-month low, an industry trade group said on Wednesday, offering more evidence the country's housing market slump is deepening.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity , which includes both refinancing and purchasing loans, for the week ended September 22 fell 4.9 percent to 566.6 from the previous week's 595.8, its highest level since April.

Applications were 21.4 percent below their year-ago level.

http://news.yahoo.com/s/nm/
20060927/bs_nm/economy_mortgages_dc; September 28, 2006 5:27 AM
Anonymous said...: Did the National Housing Price Peak in July 2006?

Sales of new single-family homes increased by 4.1 percent last month to a seasonally adjusted annual rate of 1.05 million units, the Commerce Department reported Wednesday. It was the biggest increase since an 8 percent gain in March

However, the price of homes sold in August fell to $237,000, down 1.3 percent from August 2005. It was the biggest year-over-year price decline in more than three years.

http://www1.whdh.com/news/articles/
business/BO29571/; September 28, 2006 5:41 AM
Anonymous said...: Mortgage Suit Says ‘Trust Us’ Led to Fleecing

Using these connections, according to a recent lawsuit, the two women and another relative in Indianapolis perpetrated one of the largest mortgage frauds in American history, victimizing dozens of local residents and, according to sources with knowledge of the accusations, at least $40 million in fraudulent loans — perhaps even twice that amount.

The F.B.I. called mortgage fraud an “epidemic” last December, noting that losses associated with the crime had jumped to more than $1 billion last year from $429 million in 2004. Although the hot housing market that may have at least partly given rise to the fraud boom is cooling, officials say mortgage fraud losses are on pace to increase again this year.

In August last year, he said, the largest federal sentence for mortgage fraud — 30 years — was handed down to Chalana McFarland of Atlanta, for her role in a major flipping operation that netted $20 million from 1999 to 2002. As a testament to the elaborate nature of the modern mortgage fraud operation, also indicted were two paralegals, six loan originators, one broker, three real estate agents, three appraisers, three straw borrowers, one bank employee, an identity thief, and a property manager.

“This represents an approach to mortgage fraud whereby an entire mortgage fraud ring is targeted and addressed,” Mr. Stern said.

http://www.nytimes.com/2006/09/28/
us/28martinsville.html?pagewanted=
2&ei=5040&en=535cdc3c455d1c03&ex=
1160107200; September 28, 2006 5:48 AM
Anonymous said...: Housing agency officials grappling with potential layoffs

STOCKTON - The board that oversees the San Joaquin Housing Authority today will review early-retirement packages officials hope will help avoid layoffs as the agency struggles with a $1.18million deficit.

The Housing Authority provides affordable housing for thousands of San Joaquin County residents through public housing and rental assistance. Housing agencies across the country are struggling with budget shortages caused by reduced federal funding, officials said.

http://www.recordnet.com/apps/
pbcs.dll/article?AID=/20060927/
NEWS01/609270325/1001; September 28, 2006 6:06 AM
Anonymous said...: Canada feels U.S. pain in housing
Construction product makers cutting jobs, shutting down plants in sluggish market

The deepening U.S. housing slump is taking a toll on Canadian construction product firms, and not just those that sell into the American market.

There have already been a spate of layoffs and closings at Canadian-owned companies and U.S. businesses that operate in Canada as the declining markets add on to other economic problems, including a high Canadian dollar and the uncertainties of the softwood lumber dispute.

This past Friday, Vancouver-based Ainsworth Lumber Co. Ltd. said it was suspending production of oriented strand board (OSB) at two of its Minnesota facilities, citing "protracted weak structural panel market conditions."

In recent weeks Kruger Inc. interrupted production at three mills in Quebec, Tembec Inc. temporarily shut down a sawmill in Béarn, Que., and Louisiana-Pacific Corp. indefinitely closed an OSB mill in St.-Michel-des-Saints, Que.

Even those firms that have not had to resort to layoffs have acknowledged the pain the U.S. housing slump is causing.

"All of our mills, whether in Canada or in the U.S., are impacted by the slowdown on the demand side, which is coming from the slowdown of the U.S. housing market," said Robin Lampard, vice-president of Toronto-based construction products maker Norbord Inc.

Norbord had expected the slump, however, and braced itself by focusing on cost cutting, she said.

"We knew the day would come. We had three phenomenal years and it doesn't last forever. The housing market in the U.S. was at historically unsustainable levels [so] the fact that it came off is no surprise to anybody."

With a low cost base now firmly in place, Norbord "believes we'll ride out the storm," she said.

Construction product makers that don't export to the United States are also not immune, said Toronto-Dominion Bank chief economist Don Drummond. That's because the slowdown has caused an overall drop in construction material prices across the continent.

"If you're not exporting into the U.S., you're still affected by what happens in the U.S. market," he said.

Mr. Drummond noted that lumber prices have fallen sharply over the past few months, with the price of 1,000 board feet of lumber down to about $270 (U.S.) compared to about $450-million in mid-2005.

But the U.S. housing slump will have an impact beyond lumber companies, he noted, and will likely hurt any Canadian company exporting housing components to the United States, including door and window makers. Even copper prices could be dented, he said, because there is a lot of copper in new homes and a drop in demand could hit the commodity's price.

Over all, the housing slump "will cut though a fairly heavy swath" of industries, Mr. Drummond said.

Many Canadian housing product suppliers, including Gienow Windows and Doors, plastic building products maker Royal Group Technologies Ltd. and bathroom fixture maker Maax Holdings Inc. are suffering financially, although so far they have not blamed the reticence of U.S. home buyers.

Still, the biggest impact of the U.S. housing slump will be on lumber producers, and there could easily be more layoffs and shutdowns across North America before the end of this year, said analyst Mark Bishop of RBC Dominion Securities in Vancouver.

"Certainly the third and fourth quarters are going to be very, very difficult," he said, with an improvement in stability and prices not likely to come until some time in 2007.

"There are certain regions that are going to take a lot of pain and downtime, and we're quite convinced those regions are first going to be Eastern Canada and the inland area of the U.S," he said.

From an investor's perspective, the key is to look for companies that have strong enough balance sheets to hold out until there is a return to growth in the U.S. housing market, Mr. Bishop said. The strongest companies might even make acquisitions during the slump, he added.

Among his recommendations are West Fraser Timber Co. Ltd., International Forest Products Ltd. and Canfor Corp.

http://www.theglobeandmail.com/
servlet/story/
LAC.20060926.RHOUSINGCANADA26/
TPStory/Business; September 28, 2006 6:16 AM
Anonymous said...: Richmond cabinet maker lays off 76

RICHMOND -- Hurt by the slowdown in housing construction, MasterBrand Cabinets of Richmond has laid off 76 hourly and salaried employees indefinitely. The layoff amounts to about 16 percent of its work force. The move was made to remain competitive in the housing construction industry, the company said. The layoffs come less than two years after the Richmond facility added 80 workers, the Palladium-Item reported.

http://www.indystar.com/apps/
pbcs.dll/article?AID=/20060926/
BUSINESS/609260383/-1/NEWS06; September 28, 2006 6:25 AM
Anonymous said...: Slump Has Homebuilders Offering Buyers Incentives

The number of new homes sold in the United States increased in August over the previous month, after three consecutive months of decline. The median price of new homes also rose slightly over the previous month.

But despite the news that the downturn in the housing market is already over, analysts were quick to point out that the uptick may be temporary -- and that both sales and median prices are down from a year ago.

The news may help homebuyers who are offering incentives to entice buyers to the weak market. In some cases, builders are offering to bridge loans to buyers until they are able to sell their existing homes. The backlog of unsold homes has risen more than 43 percent in the last year.

The National Association of Realtors says U.S. home prices have risen 50 percent since 2000.

But with housing inventory up, big builders like Toll Brothers, Pulte and Lennar are offering buyers incentives to keep them in the market for a new house. In some cases, they offer below-market mortgage rates -- or even provide bridge loans to buyers until they can sell their old house.

Home builders would like to believe the incentives are what caused the rebound in new home sales last month, but that's far from clear. It may have been a slight decrease in long-term mortgage rates.

Most analysts agree the housing market hasn't bottomed out yet -- there is a glut of both new and old homes on the market right now. And many buyers say they expect prices to fall further in coming months.

Still, most big home builders beleive they will weather the current downturn. Of perhaps more concern to many economists is what the slowdown will mean for the broader economy. The housing sector accounts for millions of jobs and a signficiant share of overall U.S. economic activity.

http://www.npr.org/templates/
story/story.php?storyId=
6154410&ft=1&f=1006; September 28, 2006 6:36 AM
Anonymous said...: Housing dip isn't media's fault

Too many people in the housing business think negative news about market conditions – both local and national – is scaring off potential buyers.

Gary Watts, the Orange County industry's widely watched forecaster, cites news coverage as a major, depressing market force in his latest outlook.

"I think the media, in general, needs fear-driven articles to keep readers interested or viewership up," Watts told me. A bold headline highlighting what Watts sees as minor market trends "makes everybody's think is this the beginning of the end."

I can't say that all coverage of housing's gyrations is 100 percent fair. Or that reporters who cover the industry – or the editors who chose what stories get the best display – never exaggerate the importance of statistical housing trivia.

Basically, we're reacting to our own consumer surveys that say our audience can't get enough real estate information. Plus, any market at a turning point is an appealing tale – whether the asset in question is a stock, commodity or a house.

However, after two decades in this town – a journalism era that encompasses two remarkable housing cycles – I'm keenly aware that "shoot the messenger" is a popular real estate endeavor.

By any measure, the housing market is struggling.

Appreciation is, at best, modest. That's no sin, just a stark change. And sales activity is at multi-year lows. That's money gone from brokers, lenders and those in-between.

So what should this columnist do when, say, my proprietary economic index shows local housing suffering its worst quarter since 1995?

We in the media sell credibility. (Yes, many media outlets profit from real estate advertising, so a healthier home market is a theoretical plus.)

We'd be fools, though, to damage our long-term reputation for honest reporting by painting a rosy picture for housing when its outlook is – at a minimum – cloudy. Such a charade assumes that upbeat coverage could actually turn the market.

"The real estate industry does not understand the media's need for content that attracts readers, listeners and viewers," says often-quoted industry consultant Patrick Veling from Brea. "In that way, I believe there will always be a disconnect between the media and the industry as markets ebb and flow. I see that as healthy, and have always been impressed with The Register's attitude toward running news that often alienates its biggest advertisers."
ANALYTICAL ANXIETY

Everybody's got a real estate tale. But anecdotal evidence is often dead wrong.

That's why reporters frequently base their housing stories on broader statistical tools – such as medians, averages, surveys, etc.

These statistical mixes, like any vegetable stew, won't taste perfect to everybody in the housing market. Additionally, there's no consensus on how to best read the tea leaves.

Media critics like Watts think reporters prefer the ugliest numbers. I'm not sure I agree. But I do know that the time-strapped information consumer often fixates on the juiciest nugget.

The frequent stream of housing statistics further compounds the issue. Confusion, if not contradiction, is a byproduct.

Take pricing trends. Do you want government, industry or a private analyst's data?

Many measures – national and local – show home appreciating ended this summer. That's big news because it's the first time in a decade or more that homes aren't money makers on a year-over-year basis.

Reports of slight drops in median sales prices aren't why homes don't sell. But it may be why agents face bargain-happy shoppers.

Harder negotiations equaled fewer sales. But the media are criticized for failing to note that this year's slow selling pace is a steep drop from historically busy years. When scores of folks in this town are only paid when a sale is done, any steep decline is newsworthy.

Sluggish sales helped build a huge inventory of homes for sale. Measuring this count is tricky, raising doubts about coverage of this topic. But even Watts admits this summer's flood of homes on the market was practically unprecedented.

Numerous experts quoted by the media suggest that slow sales and fat inventories came because shoppers can no longer afford home prices. But other industry insiders think affordability concerns are overstated.

Funny, the main source of affordability measurements are trade groups for agents and homebuilders. These industry-created stats confirm that buying an Orange County home is a financial test for many.

All this anxiety adds up to another statistical debate: foreclosure activity.

The media are guilty of poorly explaining the huge percentage-point increases in mortgage-repayment problems – from a lender's filing that starts the foreclosure process to the actual loss of a home to the banker.

The 2006 rush of foreclosure paperwork is largely, in reality, a jump above what were clearly unsustainable lows. But any news about rising foreclosure activities can caution the shopper considering extreme debts to buy a home. If this kind of buyer is scared off from a purchase, a sexy headline may have provided societal good.

"Isn't it important for the skepticism to take place?" says investment adviser Charles Rother from Los Alamitos. "Housing prices in many areas of California are no longer supported by income, rents or likely employment growth. Maybe we should ask, 'Did the media do enough?' "
BASIC INTELLIGENCE

Paul McCulley, the top Fed watcher at Pimco bond traders in Newport Beach, summed up the media's housing pickle best: "If some broker is blaming you now, he should also thank you for two years ago. Can't have it both ways!"

Nobody complained in 2003 or 2004 about frequent reports of all-but-instant real estate wealth. In fact, numerous real estate types enjoyed reminding me in those gravy days that I incorrectly predicted in an April 2002 column that the O.C. housing market may be peaking.

Analyzing any market – especially a highly quirky one like real estate – is largely an art, not a science. It's a challenge the media take seriously.

The early skeptics of the home-boom's sustainability were ridiculed. Take Anil Puri, Cal State Fullerton's business school dean.

In 2004, Puri was forecasting a harsh end to the local real estate boom. When that prediction was first made – and well publicized in the local media – his sanity was questioned. Today, he takes no personal glee that a market cooling is finally under way.

"I believe in the basic intelligence of the average person," Puri says. "I don't think the media's reporting changed (shopper's) minds. They are information savvy. They look at all kind of evidence."

Shopper psychology is being severely tested. Personally, I can't yet tell if this is only a modest cool down – or the start of a significant setback.

But I'll bet the smart home shopper won't rely solely on news stories before deciding on a huge financial commitment.

http://www.ocregister.com/
ocregister/money/columns/
article_1288624.php; September 28, 2006 6:41 AM
Anonymous said...: http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20060928/BUSINESS04/609280333/1071

CRY ME AN OCEAN!!!; September 28, 2006 3:09 PM
Anonymous said...: New home sales up in August
4.1 percent jump considered a 'blip'
MARTIN CRUTSINGER The Associated Press

WASHINGTON -- Sales of new homes, after falling for three months, rose in August. But the gain was expected to be temporary as the battered housing industry struggles with a near-record level of unsold homes.
The Commerce Department reported yesterday that home sales increased by 4.1 percent last month, the best showing since an 8 percent increase last March.

But even with the increase, the median price of a new home fell to $237,000, a drop of 1.3 percent from August 2005. It was the first year-over-year price decline since late 2003.

Other reports: Earlier, it was reported that sales of existing homes fell for a fifth straight month in August while the median price of an existing home dipped on a year-over-year basis for the first time in more than a decade. Also, construction of new homes and apartments plunged by 6 percent in August.

Analysts were unimpressed with the August rise in new home sales, noting that it followed a sharp 7.5 percent drop in July and still left sales 17.4 percent below the pace of a year ago.

"August is just a blip. Housing is still headed
down," said Mark Zandi, chief economist at Moody's Economy.com. "Everything still points to continued weakness in sales, construction and home prices."

Many analysts said the government statistics understated the drop in new home prices because they don't pick up heavy discounting that is under way as builders offer incentives such as kitchen upgrades and free landscaping to move unsold homes.

Backlog still too high: The inventory of unsold homes did decline slightly to 568,000 houses, but that was still the second highest level on record after July's backlog of 570,000 unsold homes.

"Many builders still have large inventories of unsold homes and we expect to see aggressive use of sales incentives over the balance of the year," said David Seiders, chief economist at the National Association of Home Builders.

From 2001 through 2005, housing enjoyed five consecutive years of record sales, propelled by the lowest mortgage rates in more than four decades.

However, this year sales have been falling, reflecting the Federal Reserve's two-year effort to push interest rates higher to slow the economy enough to keep inflation under control.

After 17 consecutive rate increases, the Fed for the past two months has kept a key short-term rate unchanged. That has raised hopes in financial markets that the Fed's credit tightening campaign is over, a belief that has helped to push mortgage rates lower in recent weeks.

The concern has been that the slowdown in housing could jolt the economy much as the bursting of the stock market bubble did in 2000, possibly pushing the country into a recession.

Nariman Behravesh, chief economist at Global Insight, said he believed the weakness in housing would slash a full percentage point off growth but would not be enough to send the nation into a recession.

"Housing is definitely in a serious downturn, but we don't think it is in a free-fall," he said.

Behravesh said he was looking for continued home price declines nationally in coming months of around 2 percent. He said the price drops would be much larger -- on the order of 15 percent -- in formerly hot markets in the Northeast, Florida and California.

But with mortgage rates falling and consumers getting a lift from lower gasoline prices, analysts have scaled back their concerns about a recession.

In August, sales of new homes were up in every region of the country except the West, where they dropped a sharp 17.7 percent. Sales rose 21.7 percent in the Northeast, 12.2 percent in the Midwest and 11.1 percent in the South.

In other economic news, the Commerce Department reported that orders to U.S. factories for big-ticket manufactured goods fell for a second consecutive month in August, marking the first back-to-back declines in more than two years.

Demand for durable goods dropped 0.5 percent last month to $209.7 billion, reflecting a big decline in orders for computers and other electronic products and for commercial aircraft.

But economists said the recent sharp declines in energy prices should bolster manufacturing orders in coming months.; September 28, 2006 4:31 PM
Anonymous said...: New home sales up in August
4.1 percent jump considered a 'blip'
MARTIN CRUTSINGER The Associated Press

WASHINGTON -- Sales of new homes, after falling for three months, rose in August. But the gain was expected to be temporary as the battered housing industry struggles with a near-record level of unsold homes.
The Commerce Department reported yesterday that home sales increased by 4.1 percent last month, the best showing since an 8 percent increase last March.

But even with the increase, the median price of a new home fell to $237,000, a drop of 1.3 percent from August 2005. It was the first year-over-year price decline since late 2003.

Other reports: Earlier, it was reported that sales of existing homes fell for a fifth straight month in August while the median price of an existing home dipped on a year-over-year basis for the first time in more than a decade. Also, construction of new homes and apartments plunged by 6 percent in August.

Analysts were unimpressed with the August rise in new home sales, noting that it followed a sharp 7.5 percent drop in July and still left sales 17.4 percent below the pace of a year ago.

"August is just a blip. Housing is still headed
down," said Mark Zandi, chief economist at Moody's Economy.com. "Everything still points to continued weakness in sales, construction and home prices."

Many analysts said the government statistics understated the drop in new home prices because they don't pick up heavy discounting that is under way as builders offer incentives such as kitchen upgrades and free landscaping to move unsold homes.

Backlog still too high: The inventory of unsold homes did decline slightly to 568,000 houses, but that was still the second highest level on record after July's backlog of 570,000 unsold homes.

"Many builders still have large inventories of unsold homes and we expect to see aggressive use of sales incentives over the balance of the year," said David Seiders, chief economist at the National Association of Home Builders.

From 2001 through 2005, housing enjoyed five consecutive years of record sales, propelled by the lowest mortgage rates in more than four decades.

However, this year sales have been falling, reflecting the Federal Reserve's two-year effort to push interest rates higher to slow the economy enough to keep inflation under control.

After 17 consecutive rate increases, the Fed for the past two months has kept a key short-term rate unchanged. That has raised hopes in financial markets that the Fed's credit tightening campaign is over, a belief that has helped to push mortgage rates lower in recent weeks.

The concern has been that the slowdown in housing could jolt the economy much as the bursting of the stock market bubble did in 2000, possibly pushing the country into a recession.

Nariman Behravesh, chief economist at Global Insight, said he believed the weakness in housing would slash a full percentage point off growth but would not be enough to send the nation into a recession.

"Housing is definitely in a serious downturn, but we don't think it is in a free-fall," he said.

Behravesh said he was looking for continued home price declines nationally in coming months of around 2 percent. He said the price drops would be much larger -- on the order of 15 percent -- in formerly hot markets in the Northeast, Florida and California.

But with mortgage rates falling and consumers getting a lift from lower gasoline prices, analysts have scaled back their concerns about a recession.

In August, sales of new homes were up in every region of the country except the West, where they dropped a sharp 17.7 percent. Sales rose 21.7 percent in the Northeast, 12.2 percent in the Midwest and 11.1 percent in the South.

In other economic news, the Commerce Department reported that orders to U.S. factories for big-ticket manufactured goods fell for a second consecutive month in August, marking the first back-to-back declines in more than two years.

Demand for durable goods dropped 0.5 percent last month to $209.7 billion, reflecting a big decline in orders for computers and other electronic products and for commercial aircraft.

But economists said the recent sharp declines in energy prices should bolster manufacturing orders in coming months.; September 28, 2006 4:31 PM
Anonymous said...: This morning's WSJ front page had a story on how a real estate investment club got new members (suckers) to sign documents to buy homes at inflated prices. Yet another case of people falling for
a too good to be true pitch.

WALL STREET JOURNAL

Major Mortgage Fraud Is Alleged

An alleged mortgage fraud is being investigated in a town in Virginia, where people say they were duped into applying for loans.; September 28, 2006 5:35 PM
Anonymous said...: Hey, Hey Borkafatty where are you? Did your boss finally get some spyware and you can't post all day long from work.; September 28, 2006 7:28 PM
Anonymous said...: Free Tips, Guides, Articles and Information on Mortgage-Refinance from Mortgage & Refinancing Information

http://www.refinancemortgagedot.com; September 28, 2006 10:18 PM
Anonymous said...: borkafatty is not a janitor. i think he is an inspector working for the city or county and we're paying for borkafatty to blog with us.hahaha!; September 29, 2006 12:06 AM
Anonymous said...: I think bork works for the city, leans on his shovel all day, watches gay porn and blogs at nite!; September 29, 2006 2:53 AM
Anonymous said...: Expert Research's Sept 29, 2006 new links is out

Expert Research; September 29, 2006 3:33 AM
Anonymous said...: Anderson Forecast Offers Realty Check

California’s real estate sectors will continue to decline, and some 100,000 construction jobs could be lost through 2008, according to the UCLA Anderson Forecast released Sept. 28.

But while the “economy is about to get bumpy as the housing market continues to deteriorate,” the third-quarter 2006 forecast is not predicting a recession, and is calling for a “sustained period of 1.5 percent to 2 percent growth.”

As for California, recessions historically have had major job loss in at least two sectors, such as construction and manufacturing, the forecast pointed out.

“Without recession-sized job losses, a significant decline in statewide home prices is unlikely,” according to the report.

Economist Ryan Ratcliff, who wrote the forecast, predicted that building permits will continue to decline, bottoming out in 2008, as activity returns to levels seen in 2000.

Some other tidbits:

• The California housing market continues to soften, and real estate employment has gone from “an engine of growth” to “a drag on growth in 2006.”

• The financial sector will suffer a slowdown overall, due to real estate-related declines in the state.

California’s real estate sector is about volume, not prices, according to Edward Leamer, forecast director, in a companion piece called “2005: The Year the Tortoise Won the Race, Whither California Home Prices.”

The real declines in this area will be in total volume, and not real estate prices, he said, noting that declines in volume often lead to layoffs of construction workers and lowered brokers’ commissions.

Leamer added that housing’s contributions to the gross domestic product — representing the total market value of all goods and services produced in a given year — will be very weak, with building, finance and real estate commissions suffering significant declines.

http://sdbj.com/
industry_article.asp?aID=
628576702.6018183.1369966.1258618; September 29, 2006 4:59 AM
Anonymous said...: Berrien County hopes credit cards avert foreclosure

Starting today Berrien County residents who are behind on their property taxes can pay up with a credit card.

Treasurer Bret Witkowski said he hopes the credit card option will help people tottering on foreclosure hold on to their properties.

This year the county auctioned 110 properties that were foreclosed on because of unpaid property taxes from 2003, he said.

The county saw a need for offering delinquent taxpayers a credit card option after county officials talked to residents whose properties were in the process of foreclosure.

ttp://www.southbendtribune.com/
apps/pbcs.dll/article?AID=/
20060928/News01/609280401; September 29, 2006 5:24 AM
Anonymous said...: Late credit card payments edge up

Late payments on credit card bills edged up this past spring, when high energy prices were squeezing the finances of some people.

The American Bankers Association, in its quarterly survey, reported yesterday that the percentage of credit card payments 30 or more days past due increased to 4.41 percent in the April-to-June quarter, up slightly from 4.40 percent in the January-March period.

The cooling of the once-hot housing market, meanwhile, has important implications.

``Up until now, rising home values have increased wealth, been a source of liquidity for borrowers and allowed consumers to spend out of savings,"

Chessen observed.

``It's a different world now."

http://www.boston.com/business/
personalfinance/articles/
2006/09/28/
late_credit_card_payments_edge_up/; September 29, 2006 5:40 AM
Anonymous said...: Risky mortgages threaten a squeeze

The overall impact is muted, but some 500,000 homeowners are projected to face foreclosure.

In 1990, the last time the nation was entering a real estate slowdown, less than 10 percent of home loans were ARMs, adjustable-rate mortgages. For the first half of this year, that number is 46 percent of the total, measured in dollar volume, says Richard Brown, chief economist at the Federal Deposit Insurance Corp.

Of all the adjustable-rate loans, 63 percent of them this year have been nontraditional: either "interest only" loans (it's up to the buyer whether to pay any principal to build home equity) or "option ARMs," which give borrowers a choice of several possible payments each month. Even fixed-rate loans today can be "interest only."

The biggest trouble lies with the adjustable loans that begin with artificially low interest rates. Those rates may only last for a month, a year, or two years, and then comes a "payment shock" as the rates reset in ways that can double the required payments.

Earlier this year, an analysis by First American Real Estate Solutions in Santa Ana, Calif., estimated that $368 billion in adjustable-rate mortgages originated in 2004 and 2005 are at risk of default because of this pattern. Many more borrowers with traditional ARM loans also face the prospect of rising interest rates, but of a more manageable magnitude.

"This translates into ... 1.8 million families that are at risk as a result of the possibility of default and another 500,000 that are likely to go into foreclosure," Allen Fishbein of the Consumer Federation of America said last week at a Senate hearing on nontraditional mortgages.

http://www.csmonitor.com/2006/
0929/p01s02-usec.html; September 29, 2006 5:46 AM
Anonymous said...: Mortgage check harder to write for many people

One problem many are facing is rising interest rates on their adjustable rate mortgages, also known as ARMs. These are mortgages whose interest rates rise with federal interest rates, which can have a big impact on monthly payments. And those are going up right now.

Borrowers like ARMs because they offer low initial interest rates, which allow them to buy houses more cheaply. Then the rates rise over time. Many are betting that they’ll make more money, refinance to fixed-rate mortgages or sell the house within a few years.

An overly optimistic buyer can get into a lot of trouble fast, especially if a monthly payment rises by hundreds or thousands of dollars, said Jerry L. Wass, president of First Community Mortgage in Greensboro.

Banks, which are also facing slow business as home sales lag, are more aggressively pushing for payment, said local attorney Charles E. Neill III.

"I’m seeing more foreclosures with folks that aren’t really that far behind," he said. "Used to be you’d see someone coming in and they’re 12 months behind in their payments. More and more, we’re seeing people going into foreclosure three and four months behind."

As a mortgage banker, though, Wass says banks ultimately don’t want to have to foreclose because it’s an expensive process, they get stuck with property they must sell, and they may not always get the price they need.

http://www.news-record.com/apps/
pbcs.dll/article?AID=/20060928/
NEWSREC0103/309280003; September 29, 2006 5:54 AM
Anonymous said...: Foreclosed houses going once, going twice...

GRAND RAPIDS -- With foreclosure rates skyrocketing in Michigan, more and more houses are ending up on the auction block. This week, one auction company is conducting its largest sale ever in the state.

Traditionally, it would take about one year for a house in foreclosure like this one to end up on the auction block. Banks and mortgage companies first try to sell the house on their own. But in a sluggish market, that timetable is being moved up.

http://www.woodtv.com/Global/
story.asp?S=5472931&nav=0RcebRzU; September 29, 2006 5:58 AM
Anonymous said...: anon 5:58:07,

why don't send an e-mail to lereah and retsinas and invite them to attend the auction. they might learn something.; September 29, 2006 6:00 AM
Anonymous said...: What Bankers Really Fear in Housing Crash

After months of attempting to deny that there was any real problem in the U.S. housing market, the world's leading bankers and speculators are expressing alarm at the size of the bubble they have created—the largest in financial history. With huge numbers of unsold new homes colliding with an even larger number of existing homes that have been thrust onto the market in recent weeks by panicky homeowners, the concern in Wall Street, the City of London, and in other financial capitals is not with a crash in home equity values, which many so-called experts have now conceded is inevitable, but with the effect that this blowout will have on the financial system.

That system, as the world's leading economist, Lyndon LaRouche, has repeatedly warned, is hopelessly bankrupt; it has been kept on life support through the speculative flows, drained from the real, physical economy, into financial speculation, including on housing assets. The hyperinflated housing bubble was financed by huge flows of credit in mortgages, the which have penetrated every pore of the financial and banking system, and are on the books of those institutions. As these mortgages go up in smoke, and as the physical assets (homes, townhomes, condos, etc.) that ostensibly back them up are liquidated in foreclosure or other "fire-sales" for losses, those mortgages blow up the institutions that hold them, and the whole rickety financial system goes down the tubes.

It was this knowledge that made the U.S. housing bubble a major concern, especially in those away-from-the-public corridor discussions of the global stewards of the financial system at the recent International Monetary Fund meeting in Singapore. In the "Risks" section of the IMF World Economic Outlook report, released before the conference, the collasping U.S. housing bubble was discussed in the standard hushed tones of IMF-speak: "Growth in the United States is expected to slow from 3.4 percent in 2006 to 2.9 percent in 2007, amid a cooling housing market." At its Aug. 23 IMF Board meeting, the directors noted, "Risks to the [economic] outlook appear to be slanted to the downside, with a more abrupt cooling of the housing market being a particular concern."

While public statements on the matter were muted, the U.S. housing crash and related crises among the hedge funds reportedly cast a dark shadow over the meeting.

Where LaRouche's warnings on the bubble could be dismissed by foolish people in the past, the visible signs of the ongoing crash, including warnings by public figures from the housing and financial industry itself, have brought the problem front and center.

http://www.larouchepub.com/
other/2006/3339bubble_grdzero.html; September 29, 2006 6:01 AM
Anonymous said...: Let's all wait for borkafatty's reponse shall we?; September 29, 2006 6:34 AM
Anonymous said...: Economist Peter Schiff of Euro Pacific Capital just gave the best and bluntest assessment I've seen to date on the phony economist David Lereah and his utterly ridiculous claim that the housing market has reached bottom. It can be found mid way down the article at:
http://www.financialsense.com/fsu/editorials/schiff/2006/0928.html; September 29, 2006 7:15 AM
Anonymous said...: The New York magazine interviews Nouriel Roubini

http://nymag.com/realestate/index.html

http://nymag.com/realestate/features/21675/; September 29, 2006 6:05 PM
Anonymous said...: A Flippers Worst NIghtmare!!!!

Idaho Couple's Home Infested With Snakes
Sep 26 7:35 PM US/Eastern

The Hepworths knew the house would require some maintenance. But they never thought they'd need a snake charmer. Shortly after Lyman and Jeanine Hepworth began working on a rundown property outside of town, they experienced a trauma more fit for Samuel L. Jackson's character in "Snakes on a Plane" than a pair of eastern Idaho do-it-yourselfers.

Snakes, perhaps thousands of them, fell on Lyman Hepworth's head when he opened the door to a pump house near the small house the couple planned to buy.

"When it warmed up, we walked onto the yard and the whole yard moved," Jeanine Hepworth told the Rexburg Standard Journal.

One day, Lyman Hepworth reached to turn on a light and discovered the pull cord was actually a snake.

Last March, the Hepworths were having money troubles. Struggling to pay off their medical bills and make house payments, they sold their old home.

They planned to buy a home and a couple of outbuildings from an acquaintance on a few acres outside tiny Wilford.

Then they found the snakes _ in the lawn, in the living room and in their hair.

Turns out the property was a winter snake sanctuary, likely a snake den or hibernaculum where snakes gather in large numbers to hibernate for the winter, said Lauri Hanauska-Brown, a biologist with the Idaho Department of Fish and Game.

In the spring and summer the snakes fan out across the wilds of eastern Idaho, but as the days get shorter and cooler, the snakes return to the resting place _ in this case, the Hepworth's new home _ where they ball up for heat.

The snakes are likely a terrestrial garter snake, Hanauska-Brown said. Reptiles are a protected species meaning the Hepworths cannot bait them or kill them, she said.

The couple has not contacted Fish and Game to move the garters, Hanauska-Brown said. The department would attempt to move the snakes, but it could be difficult because if they move them too far they would die and if they move them close by the snakes would likely return to hibernate, she said.

"They are used to going there and kind of balling up," Hanauska-Brown told The Associated Press. "That sounds kind of Indiana Jonesish. But this is a natural thing."

The Hepworths never moved in, but Lyman Hepworth's brother is still making payments, though the seller offered to refund their money when he found out about the infestation.

Their plan: They sent a videotape of the house, their children and, of course, the snakes to the producers of "Extreme Home Makeover," in hopes the television show would send its decorators in for a filmed renovation.

The video showed snakes slithering on the back porch, climbing up the foundation and a ball of snakes on the side of the home, Jeanine Hepworth said.

The couple will not find out if the show chooses their reptile refuge for a fix-up challenge until next year.

Meanwhile, summer has turned to fall. And the snakes that have been out for the summer are making their way back to Hepworth's little home in Wilford.

___

Information from: Standard Journal, http://www.rexburgstandardjournal.com/; September 29, 2006 8:18 PM
Anonymous said...: Based on "Real Men of Genius"

Mr. Overextended Homebuyer

http://tinyurl.com/ga2tm; September 29, 2006 10:45 PM
Anonymous said...: Hail borka, All Hail borka...King of the Dips**ts!; September 30, 2006 2:58 AM
Anonymous said...: NO HOUSING BUBBLE HERE........

Forecast: Values of homes likely to hold
Affordability in area lessens fear of bubble
ALLEN NORWOOD

Allen Norwood
Archive of Allen Norwood columns
The National Association of Realtors, which released national home sale figures just this week, earlier completed a home price analysis for the Charlotte area. It's not based on the same information in Monday's national report, of course, but it does compare trends here with those nationwide.

And the news is mostly good.

The Charlotte report says:

• Because prices here have risen at a moderate pace, as we've reported, "there are few concerns about a price bubble or a large price correction given the highly affordable conditions." Three-year appreciation here is about 15 percent; nationally, it's 31 percent.

• Compared to other metro areas, fewer mortgages here were used to buy second or investment homes, reducing the chance that homes will be dumped back onto the market.

• Job growth in North Carolina is likely to outpace the nation. Jobs attract newcomers, and those new buyers suggest that "any (home) price decline will likely be short lived."

Not all the news was rosy, though. The report says builders need to be careful not to flood the market with too many new homes. Single-family housing permits here were up 21 percent during the first quarter of 2006, compared to the same three months last year, while permits across the country dipped slightly.

New home

Also this week, the U.S. Commerce Department reported that sales of new homes unexpectedly rose 4.1 percent in August, to a seasonally adjusted rate of 1.05 million. Sales were up more than 11 percent in the South.But Dave Seiders, chief economist for the National Association of Home Builders, echoed the caution in the Realtors' report. He said many builders have large inventories.

The Commerce Department's Wednesday report says the nation's builders have a 6 1/2 month supply of homes on the market, based on the current sales rate.

Down is up?

If your head is spinning from all these statistics, here's a tidbit that might make you dizzier.

According to the Commerce Department report, the median sale price for new homes in August was $237,000, a drop of 1.3 percent -- while the average price rose 3.2 percent to $304,000.

A little like "Alice in Wonderland," isn't it? Anybody see that White Rabbit?

The contradiction just illustrates how, even at the national level, very expensive houses can skew the average upward. Experts agree that the median -- with half the homes priced below and half above -- more accurately reflects a market, but medians aren't available in many cases. The monthly MLS report for the Charlotte area doesn't include medians.

Westfield is Standard Pacific.

Last Saturday, I shared the results of J.D. Power's recent survey of customer satisfaction with Charlotte area builders. Centex and Westfield tied for the top spot. After the presses started running, I remembered that Westfield had changed its corporate name since the research firm polled buyers.

So, a recap: Centex and Standard Pacific, which is building in such neighborhoods as Calloway and Reserve at Gold Hill, tied for top spot in the survey.

Information: www.jdpower.com. Click on "Homes."

Allen

Norwood; September 30, 2006 3:53 AM
Anonymous said...: Hey mister RE from Canada.

I love your optimism. Did you come here to brag that in Canada it is all so great and things suck in America? Cool. Because I am in Ottawa, Canada. I would be happy to join you in your happiness, but reality is different.

“I doubt this will be on the same scale as South of the boarder, since we still have a very large volume of buyers that can afford homes and are actively buying.” Oh, and how so? 950,000 CAD piece of crap in Toronto where people are paid MUCH less than in CA?

"Am I ever glad I am not in the States right now. There are just too many economic factors working against the economy." --> You won’t be, in a few months.

If you came to brag about stability of Canada and about our great real estate market, I can assure people here that there is nothing to brag about. It is official that Montreal is going down (read Canadian newspapers instead of reading American blogs).

Ottawa had a record bubble for example in case you failed to follow the news. How come crappy townhouses that cost 45,000 few years ago are now 200,000 and up? Is it because things suck in America and we have a stable economy here in Canada? Or you probably forgot how much Canadian economy depends on US?

Granted, our banks were more conservative, but there was still full access to exotic loans. Yeh, conservative Canadians were a bit more conservative than Americans when Canadians were flipping, becoming “landlords”, remortgageing their houses, buying plasma TVs and other crap, right? If you think it wasn’t happening in any part of Canada, you are an idiot or an idiot in denial (especially since you are an ER agent).

“Can afford a house” Wake up. I have a really high income – but I can’t afford a crappy house even in sh*t hole suburbs. But maybe because I crunch computers for a living, so I can do the math and figure out how much my mortgage cost me when percentage goes up + gas to get to the office from that sh*t hole that would devour tons of my money. Or maybe because I am not that greedy as the majority of Canadians.

What about our other expenses on the top of crazy housing? Gas: I go to NY state on a weekend I make sure I top the gas tank prior returning to Canada – is it our stability that entitles me to through a huge portion of my income on gas? Is it because of our stability that people who live close to US border drive there to buy food? Is it our stability and great economy that makes me shop in US online, despite of a difference between CAD and USD plus customs when I still make less money than I would in US? Take a look at the stores: everything is overpriced; besdies, nobody pays such amount of tax in US as we do. We can’t even write off the percentage as people do in US. Don’t tell me that this huge tax goes into free medicine. I go to US if I need serious medical attention. For instance: to get the MRI you stay in line for over a year and line to any doctor (such as surgeon or cardiologist) is anywhere from a few months to a year? You can’t even get a GP doctor anymore. Are you aware how many sick people sell everything they own at the end of their lives after they paid this country all that tax and go to US to get proper treatment? With amount of tax I pay I’d be able to afford any medical insurance in US. Or you think Canadian dollar goes up because it is so solid? No, it’s just American fell. Do your reality and check against EURO. Stability of economy? Do you know how many Canadians leaves to work in US because they can’t get employment here or they are paid more over there?

So, do your math how I overpay here comparing to US tax payer and consumer plus take wages into consideration and tell me if I have more chances to afford a house than an american.

Phew, sorry guys about the runt and switching it to Canadian topic. Mister Happy Canadian really pissed me off.

Hello from Canada, your bubbled neighbour.; October 01, 2006 9:51 AM
Anonymous said...: Residential superintendent on the rocks northern virginia. Laid off after five years employed with top ten homebuilder, pick a name everyones doing it. Made the fourth round of layoffs and rumor mill says only more to come. All the builders in this area are throwing up the ramparts and steadying themselves for the long slowdown. They have slashed field management 50% they are not planning on a comeback within 12months.HOW LONG? No one knows anyone says they do is lying.After ten years in residential construction and contracting its now the lean times no home building for a few years but it will be back someday. see you then.; October 03, 2006 2:24 AM

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